What is the best approach to build a framework for uncommon cases?

Question

For example I was given the following case: A Government in one of the state in India wants all people to change from using standard bulbs lights to LED bulbs. They decided to subsidize the LED bulbs. They ask Mckinsey to help them finding the right subsidizing amount.

The moving to LED the government's objectives is to achieve budget savings and ecology friendly state.

Looking forward to seeing your suggestions.

Answer 1

Hi,

Basically, you need to understand how much the government is saving (and can potentially redirect on subsidizing), how much the customers are willing to pay now and how you can minimize the gap. I would approach this particular case in the following way:

1) Product comparison

Prices of the standard / LED Bulb
Value proposition of the standard / LED Bulb (replacement rate, energy efficiency, etc)
Costs per unit

2) Government potential savings (sources of subsidies)

Waste utilization savings / costs
Energy consumption savings (If energy subsidized)
Health savings (If better ecology)
Other savings

3) Customer willingness to pay

Cost savings for the household (replacement rate, energy efficiency, etc)
Additional value (More light, etc)
Ability to pay (Maximum payment they can afford, share in spending)
Adoption measures and scalability

4) Options to reduce the gap / increase the value of the pie

Other funding sources (Available budget, funds, etc)
Cheaper production (Localized production with benefits / tax-breaks from the government, state-owned production, Public-private partnerships, Centralized purchasing, etc)
Cheaper distribution (Same as with production)
Payment options / deals (Microloans, promo-pricing, etc)

Best!

Answer 2

Hi there, and thanks for asking, Indeed, setting up the framework for a profitability case can be a bit confusing, ho... (read entire answer)

Hi there, and thanks for asking, Indeed, setting up the framework for a profitability case can be a bit confusing, however, I would advise you not to think of “THE” framework wh... (read entire answer)